(Yicai Global) May 15 -- The recent sharp rise in the price of lithium carbonate in China will likely be temporary, as it is only a phased market condition, according to industry insiders.

The latest increase in lithium carbonate prices was mainly affected by a supply shortage, industry insiders told Yicai Global, adding that there has not been a recovery in demand from the downstream new energy vehicle market.

In January, US electric vehicle maker Tesla sparked a price war in the world’s biggest auto market. As more than 40 Chinese and foreign carmakers cut prices of their EVs, the price of lithium carbonate began to fall as the stock of the battery raw material began to pile up.

The average lithium carbonate price reached CNY242,000 (USD34,750) per ton on May 12 after ten consecutive price raises, an increase of 35.6 percent from its lowest of CNY178,500 in late April, according to statistics released by the Shanghai Nonferrous Metal Network.

The price of lithium carbonate will likely drop below CNY100,000 per ton, Wang Yu, chief executive officer of Chinese lithium battery maker Farasis Energy, told Yicai Global. Prices are high because of speculation factors, Wang added.

With the expansion of the NEV industry’s oversupply ratio, lithium prices are expected to face further downward pressure in the next two years, and will continue to fall after a phased stop, a Citic Securities report showed.

Whether lithium carbonate prices will stabilize depends on the destocking of power batteries and the recovery of terminal demand, Huaxi Securities said.

Lithium carbonate is a core material of NEV batteries. Chinese battery and car giant BYD once said lithium carbonate accounts for more than half of the cost of batteries, meaning that the price of the metal has a great impact on the cost of NEVs.

China’s NEV production and sales reached 2.3 million and 2.2 million units in the first four months, both up 43 percent from a year earlier, according to data from the China Association of Automobile Manufacturers. The figures soared over 90 percent between January and April last year from the same period in 2021.

Editors: Shi Yi, Futura Costaglione